Digitalization is a broad term that connotes the use of electronic means and ways to conduct banking. It encompasses products and services that bank customers can typically access using their mobile devices or computers, or in general without human intervention from the bank. From a user perspective, digitalization confers enormous benefits in the form of ease, speed and multiple means of access and a paradigm shift in engagement. Since banking as a whole benefits from going digital, it is only a matter of time before operations turn completely digital so as to complete the digital transformation journey.

As digitalization is here to stay, banks cannot afford to remain stuck with old world ways of doing business and will be quickly overshadowed by competition unless they adopt digitalization in a big way. Let us examine a few key strategies to help banks with that.

Digitalization as part of banks' mission and vision

Tradition-bound banks usually state customer centricity or customer experience as their motto in their vision and mission documents. Since digitalization will be all encompassing in the days to come, banks should consider incorporating it in their mission and vision. This will seriously impact their budget, as well as the outlook and culture that they project both to employees and customers. A bank that proclaims digitalization as a key objective will have to make both strategy investments as well as tactical adjustments in orienting its operations and equipping its employees for the digital road ahead. Further to that, priorities can often conflict at different levels of the bank's hierarchy and alignment can be checked with the vision and mission to iron them out.

Partnership with technology companies

In a non-digital environment it will suffice for banks to wait out for technologies to mature before soliciting help from technology companies to introduce new technologies for business. Additionally, pain points in operations were tactically addressed from time to time with technology based reactive measures. In a digital environment this wouldn't work as the competition will claim valuable market share which will be very difficult to recapture at a later stage. Instead of waiting for a host of pain points to surface before taking the digital plunge, banks could make a big decision to partner with technology companies operating in the banking space. The technology companies can periodically impart digital product education to the bank management and staff and prepare them for the change ahead.

A second step for the bank would be to invest in pilot projects as part of partnering the technology companies' evolving products. This would allow both the technology company and the bank to share each other's prospects as well as make the bank privy to cutting edge digital products and services that outwit competition.

Becoming a data driven organization

In the digital age, cost, speed, ease and seamlessness of operations matter most to banks and their customers. Since there are multiple products and services on offer, banks will need to leverage analytics technologies to gather useful insights. This could include discerning minute data patterns based on customer demography, geography, network usage, devices, products and types of apps used, customer satisfaction and many other parameters of relevance. Since analytics affords perspectives from just about any angle as long as data is made available, banks must invest in training and retraining staff from top to bottom in becoming a data driven organization.

A very good approach is to arrive at a quantitative framework to monitor digitalization. A four step process comprising Plan, Deploy, Measure and Improve could be adopted to continually monitor digitalization. The Planning step involves building a roadmap for the short term, medium term and long term digital strategies for the bank. The plan must be duly base-lined after approval from the board and top management. Deployment consists of deploying a tool which will measure the digitalization quotient and whose parameters are attributed to customer satisfaction elements and operational markers like cost, investment etc. Measure relates to measuring and recording the parameters on a database through both manual and automated means. The Improve step refers to learning by analysing the data from the previous step and then instituting organizational steps on a continuing basis.

Adopting automation

Digital services present unprecedented opportunities for banks to automate operations in myriad ways. While there is a caveat that the human touch should not be lost, the very nature of digital technologies lend themselves to automation. For example, the e-wallet, which stores all the customer data on the client or server side is a definitive shift towards improving customer experience. Blockchain technology which is set to revolutionize digital transactions, is another case in point.

Banks should basically look at the entire chain of operations and identify repetitive and mundane tasks which are currently done by individuals. Splitting the entire process into smaller chunks and then exploring automation options with the technology partners is a good idea.

A consequence of automation is a reduction in the workforce. This basically means the bank will have reduced its manpower costs, with an option to redeploy those whose jobs have been automated, to more useful pursuits.

Shifting investments from maintenance to innovation

Banks tend to follow a reactive model of technology adoption, waiting for a technology to mature before jumping in. In times of intense digitalization, this may not always help. The banks' business models may need an overhaul to facilitate early stage strategic investments in emerging technologies in collaboration with technology companies. Money saved through automation can be reinvested in these strategic investments. Innovation may be crowdsourced with customers.

In general, identifying slack and inefficiencies, and pooling back resources for innovation should be an ongoing process. This is closely tied to the previously mentioned strategies of becoming a data driven organization and adopting automation.

Conclusion

Digitalization has spawned disruptive ways and means of accessing banking services and calls for radically altering banks' perspectives and priorities on the conduct of business. The future of the bank is digital and perhaps digital alone and that means banks committed to technology will survive competition and serve into the distant future.

Digitalization also means banks increasingly need to mirror the underlying technologies in their outlook, plans and operations and hence a strategy of close cooperation with technology companies will be of benefit.